ACIT, New Delhi V. Shri Naresh Kumar Verma, New Delhi

ITA 4164/DEL/2010

• Counselvise Citation: 416420114 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 25-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: V RAJ KUMAR
• Keywords: Business income
• Section: 10B; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A. NO.4164 /DEL/2010 ASSESSMENT YEAR : 2004-05 ACIT, SHRI NARESH KUMAR VERMA, CIRCLE-35 (1), VS A-19, ANAND VIHAR, VIKAS BHAWAN, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) (PAN /GIR/NO.AACPV-1328-C) APPELLANT BY : SHRI R.S. NEGI, SR. DR RESPONDENT BY : SHRI K. SAMPATH & SHRI V, RAJKUMAR, ADVOCATES. ORDER PER K.D. RANJAN, AM: THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2004-05 ARISES OUT OF ORDER OF LD CIT(A) XXVII, NEW DELHI. THE GROUNDS O F APPEAL RAISED ARE REPRODUCED ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS IGNORED THE PROVISION LAID DOWN IN SECTION 154 OF THE INCOM E TAX ACT, 1961. 2 I.T.A. NO.4164 /DEL/2010 2. THE LD CIT(A) HAS ISSUED WRONG DIRECTION TO TREAT F OREIGN EXCHANGE FLUCTUATION AS BUSINESS INCOME AND ALLOWED THE SAME FOR CLAIMING EXEMPTION U/S 10B OF THE ACT AMOUNTING TO RS.19,58, 099/-. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER ADD OR FORGO ANY GROUND (S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO ALLO WANCE OF DEDUCTION U/S 10B IN RESPECT OF FOREIGN EXCHANGE FLUCTUATION GAIN . THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER WHIL E COMPUTING THE TOTAL INCOME DID NOT TREAT THE FOREIGN EXCHANGE FLUCTUATI ON GAIN AS PART OF EXPORT PROFIT. HOWEVER, HE INCLUDED THE FOREIGN EXCHANGE F LUCTUATION GAIN AS PART OF TOTAL TURNOVER. THUS, A SHORT DEDUCTION U/S 10B WAS ALLOWED. SUBSEQUENTLY THE ASSESSEE FILED RECTIFICATION APPLICATION U/S 15 4 OF THE ACT SEEKING BENEFIT OF FOREIGN EXCHANGE FLUCTUATION GAIN AS PART OF EXP ORT TURNOVER. THE CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE ASSESSING OFFICE R ON THE GROUND THAT FOREIGN EXCHANGE FLUCTUATION GAIN WAS NOT DERIVED F ROM EXPORT BUSINESS BUT WAS ATTRIBUTABLE TO ASSESSEES EXPORT BUSINESS. HE ALSO OBSERVED THAT THERE WAS NO MISTAKE APPARENT FROM RECORD. SINCE THE ISS UE WAS DEBATABLE IN NATURE, THE BENEFIT COULD BE ALLOWED U/S 154 OF THE ACT. 3. ON APPEAL BEFORE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAD EARNED INCOME ON ACCOUNT OF HIGHER FOR EIGN EXCHANGE REALIZATION BECAUSE OF EXCHANGE RATES FLUCTUATION D URING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. TH E ASSESSING OFFICER HAD WRONGLY EXCLUDED THE SAME FROM EXPORT TURNOVER AND AT THE SAME TIME CONSIDERED IT AS PART OF THE TOTAL TURNOVER IN COMP UTING EXEMPTION U/S 10B OF 3 I.T.A. NO.4164 /DEL/2010 THE ACT. IT WAS ALSO SUBMITTED THAT IN EARLIER YEAR S, SIMILAR CLAIM WAS ALLOWED BY THE ASSESSING OFFICER U/S 10B OF THE ACT. LD CI T(A) ON CONSIDERATION OF THE FACTS HELD THAT FOREIGN EXCHANGE FLUCTUATION GA IN WAS TO BE TREATED AS INCOME DERIVED FROM BUSINESS AND ACCORDINGLY DEDUCT ION U/S 10B WAS ALLOWABLE. HE PLACED RELIANCE ON VARIOUS DECISIONS IN SUPPORT OF HIS CONTENTION INCLUDING THE DECISION HON'BLE SUPREME C OURT IN THE CASE OF CIT V. ALFA LAVEL (INDIA) LTD. 2009 ITR TMI -32446 (SC ). 4. BEFORE US LD SR. DR SUBMITTED THAT FOREIGN EXCHA NGE FLUCTUATION GAIN CANNOT BE TREATED TO HAVE BEEN DERIVED FROM THE EXP ORT BUSINESS. IT IS ATTRIBUTABLE TO THE EXPORT BUSINESS CARRIED ON BY T HE ASSESSEE. THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE DISAL LOWANCE OF DEDUCTION U/S 10B OF THE ACT. HE FURTHER SUBMITTED THAT THE ISSU E BEING DEBATABLE IN NATURE, IT CANNOT BE RECTIFIED U/S 154 OF THE ACT. ON THE OTHER HAND, LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS WELL KNOWN FACT THAT AT THE TIME OF EXPORTS OF GOODS THE BILL IS RAISED IN FOREIGN CURRENCY, THE VALUE T HEREOF IS TAKEN IN INDIAN CURRENCY IN THE BOOKS OF ACCOUNT. WHEN SALE PROCEED IS REALIZED AND RECEIVED IN INDIA IN CONVERTIBLE FOREIGN EXCHANGE, THE EFFECT OF THE PROFIT/LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION HA S TO BE GIVEN AT THE TIME OF RECEIPT. THUS, THE FOREIGN EXCHANGE GAIN/LOSS RECE IVED BY THE ASSESSEE WILL BE PART AND PARCEL OF THE SALE PROCEED. THEREFORE, THE SAME WILL CONSTITUTE PART OF EXPORT TURNOVER. WHEN FOREIGN EXCHANGE FLU CTUATION GAIN CONSTITUTES A PART OF EXPORT TURNOVER, THERE IS NO JUSTIFICATIO N FOR EXCLUDING THE FOREIGN EXCHANGE GAIN FROM THE EXPORT TURNOVER AND RESTRICT ING THE DEDUCTION U/S 4 I.T.A. NO.4164 /DEL/2010 10B OF THE ACT. ACCORDINGLY, IN OUR CONSIDERED OPIN ION LD CIT(A) WAS JUSTIFIED IN ALLOWING THE BENEFIT OF DEDUCTION U/S 10B IN RESPECT OF FOREIGN EXCHANGE FLUCTUATION GAIN. 6. AS REGARDS THE CONTENTION OF THE LD ASSESSING O FFICER THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN IS ATTRIBUTABLE TO THE EX PORT BUSINESS, THIS IN OUR CONSIDERED OPINION IS NOT THE CORRECT VIEW. WHEN FO REIGN EXCHANGE FLUCTUATION GAIN/LOSS FORMS PART OF THE EXPORT SALE PROCEEDS ON REALIZATION OF THE SAME IN CONVERTIBLE FOREIGN EXCHANGE, CANNOT BE SAID TO BE ATTRIBUTABLE TO THE EXPORT BUSINESS. IT HAS DIRECT NEXUS WITH THE S ALES AFFECTED BY THE ASSESSEE. IT IS A PURE QUESTION OF FACTS. THEREFORE , NO DEBATABLE ISSUE IS INVOLVED IN THE CASE OF FOREIGN EXCHANGE FLUCTUATIO N GAIN WHICH FORMS PART OF EXPORT TURNOVER. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD CIT(A) ALLOWING THE RELIEF TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED, 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29TH D AY OF FEBRUARY, 2012. SD/- SD/- (R.P. TOLANI ) (K.D. RA NJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 29.2.2012. HMS 5 I.T.A. NO.4164 /DEL/2010 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). 6 I.T.A. NO.4164 /DEL/2010